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EU sanctions on Iran’s central bank overturned

The European Court of Justice has struck down the European Union’s decision to freeze the assets of Iran’s central bank, in the latest of a series of legal blows to the sanctions regime imposed by the EU to persuade Iran not to develop nuclear weapons.

Yesterday’s ruling, against which the EU’s member states can still appeal, came just as the EU’s foreign-policy chief, Catherine Ashton, was starting the latest round of international talks with Iran on its nuclear programme.

The ECJ said that the asset freeze, which has been in place since 2012, relied on inadequate evidence that provided Iran with too little opportunity to mount a defence.

“The reasons relied on are so vague and lacking in detail that the only possible response was in the form of a general denial,” the court said. “Those reasons therefore do not comply with the requirements of the case-law.”

In blacklisting Iran’s central bank, the EU’s member states cited the bank’s “involvement in activities to circumvent sanctions”. The ECJ said that the EU’s Council of Ministers, representing the EU’s then-27 member states, had justified the listing of the Iranian central bank based on confidential information from one member state.

The sanctions imposed on Iran by the EU, previously a major trading partner, have had a significant impact on Iran’s economy, and became an important feature of Iran’s presidential elections last year, with most candidates agreeing in the final televised debate that the sanctions had had an effect.

The EU suspended some of its sanctions against Iran on 21 January this year, in response to a diplomatic breakthrough last November that saw Iran agree to freeze or roll back parts of its nuclear programme. The ongoing talks, currently being held in New York, aim to transform this interim agreement into a permanent deal by 24 November. A permanent deal would lead to the removal of EU and US sanctions against Iran. The other powers involved in the UN-based talks – Russia and China – have not placed Iran under sanctions.

The most significant of the sanctions that the EU has suspended has eased Iran’s exports of oil. Iranian oil remains barred from the EU, but EU insurers can now provide insurance for Iranian shipments to other countries. EU-based insurers historically accounted for all but a tiny fraction of the insurance for Iranian oil tankers.

The EU’s financial sanctions against Iran were not suspended. In addition to the restriction on the central bank, Iranian commercial banks have been prevented from using the Swift system used to clear international bank transfers.

EU sanctions are frequently challenged in the EU’s courts, with cases this year including appeals by Syrians and several Ukrainians. The EU’s sanctions on Iran have encountered particular legal difficulties, and by the end of last year 26 Iran-related restrictions had been eliminated by the lower court in the EU’s system, the General Court. Some of the rulings cited a lack of adequate evidence.

In some instances, the EU’s member states have come back with additional evidence, leading to Iranian institutions and companies being put back on the sanctions blacklist.

Difficulties satisfying the EU courts have regularly been cited by EU officials as reasons for difference between the EU and the United States in the targets and timing of sanctions imposed on Russia to persuade it to help end the crisis in Ukraine.